Crude Oil Traders Await OPEC Decision

Nymex crude oil futures on the New York Mercantile Exchange last week notched a fresh 3.5-year low of $48.25 a barrel amid a slump in energy demand worldwide that has been precipitated by a general global economic recession.

The two-thirds haircut in crude prices since the July all-time high above $147 has pushed U.S. gasoline prices well below $2 a gallon -- one bright spot in the economic gloom. However, the influential OPEC oil cartel is also experiencing economic pains and is meeting this weekend to again consider turning its collective oil spigot a bit tighter amid the strong downtrend in crude oil prices.

Ministers of the Organization of Petroleum Exporting Countries are meeting in Cairo, Egypt, on Saturday. The cartel is divided on whether to reduce production. Wire services reported on Friday that Nigeria's oil minister said his country would back an output cut Saturday, provided that all OPEC members agreed on the move. However, wire reports also said Iran's and Qatar's oil ministers hinted a decision on a production cut may be tabled until OPEC's regularly scheduled meeting in December.

The lack of cohesive statements coming from OPEC members does leave energy traders unsure of any final outcome from this weekend's meeting. That suggests trading could be more volatile early next week as traders factor in the meeting's results into crude oil's price structure.

Crude oil market bears do note that the OPEC cartel has recently cut its production quotas twice, yet crude oil prices continued to slide. For some of the smaller cartel members, embracing further production cuts would be a tough pill to swallow, since doing so would further reduce their own economies' revenue. OPEC produces around 40% of the world's crude oil.

Importantly, crude oil traders will continue taking their cues from daily movements in the U.S. stock market. Any further deterioration on the equities front will also lead to selling pressure in the energy markets. Next Friday's U.S. jobs report will be the focus of energy traders, as that data could produce the weakest readings in a quarter century, according to some economists.

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.